GLOBAL NATIONAL SECURITY AND SANCTIONS: Key Hurdles that Submarine Cable Owners and Developers Must Navigate

BY ANDREW D. LIPMAN AND DENISE S. WOOD

 

 

 

 

 

 

 

In an era where digital communication underpins every facet of our global society, the significance of submarine cables stretches far beyond the ocean depths they inhabit. These cables, responsible for carrying over 99% of international communications, are at the heart of global connectivity, powering everything from cloud services to the advancements in artificial intelligence. However, as the demand for this connectivity skyrockets, the geopolitical landscape presents a formidable challenge to the seamless flow of data across the world.

The global market for submarine cables is projected to reach a staggering $48 billion by 2030, yet this growth is shadowed by the specter of economic nationalism and political tensions. Countries like the United States and the United Kingdom find themselves on one end of the spectrum, grappling with the rise of economic nationalism that could potentially stifle international cooperation. On the other end, nations such as China are leveraging political influence to assert dominance over global economic structures, raising concerns about the potential Balkanization of the internet and global communication networks.

Recent events underscore the vulnerability of subsea systems to geopolitical strife and cyber warfare. Notably, the United States Department of Homeland Security thwarted an attack on subsea cable servers in Hawaii by an international hacking group in 2022. The same year witnessed threats from a Russian official to target Western submarine cables in retaliation for suspected sabotage of the Nord Stream gas pipeline. In another part of the world, the Houthi group in Yemen threatened to sever cables in the Red Sea, underscoring the global scope of threats to these vital infrastructures.

These challenges are compounded by complex regulatory hurdles faced by companies investing in submarine cables. Long-term projects involving multiple consortium members from diverse geopolitical backgrounds are fraught with difficulties, particularly in securing joint build, supply, landing, and capacity agreements.

In the United States, submarine cables landing are regulated by the FCC, requiring a meticulous review process by Team Telecom to assess national security concerns. This process, which can extend over a year, examines the security of the data through the cables and the degree of foreign government control over the project participants. Recent executive orders have further emphasized the scrutiny of cables owned or operated by entities under the influence of nations considered as threats.

Furthermore, the impact of economic sanctions and national security on submarine cable transactions cannot be overstated. Sanctions and trade controls, particularly those targeting Chinese technology companies, have reshaped partnerships and system configurations, pushing operators to seek alternative routes that circumvent contentious geopolitical territories.

As we look to the future, the article highlights strategies for mitigating risks associated with sanctions and national security reviews. These include conducting comprehensive due diligence, agreeing on applicable sanctions frameworks, and potentially structuring deals to limit exposure to consortium-related risks.

The intricacies of submarine cable infrastructure, set against the backdrop of a tumultuous geopolitical climate, underscore the need for a balanced approach that navigates national security concerns while fostering international cooperation. As digital connectivity continues to expand, the resilience and security of submarine cables remain pivotal to our connected world.

To read the complete article, check out Issue 135 of the Sub Tel Forum Magazine here